How would you optimize your cloud costs

Cloud computing

Cloud computing has a number of advantages. The effort involved in introducing a cloud solution is relatively low; this is usually done with a few clicks of the mouse. Since the cloud provider provides updates for the software, for example, there is no administration effort for the operation of the IT solution. Larger investments in local hardware are also no longer necessary. Payments are made for precisely those services that are actually needed.

But cloud services can also be expensive, especially when it comes to licensing costs and compliance. The analysts of the Gartner Group describe the dilemma as follows: “Those responsible for IT sourcing and purchasing management must recognize that SaaS subscriptions do not solve the complexity of licenses on a turnkey basis, but increase the cost risks and expand the requirements for SAM (Software Asset Management) . "

Office 365: benefits vs. financial risks

The most widely used SaaS application in the world is Microsoft Office 365. It shows how cloud software has to balance the advantages against the financial risks. The lower hardware and maintenance costs appear attractive to IT administrators. In addition, Office 365 offers certain advantages for users, for example that they always have access to files and emails. However, these benefits come at a price.

Not long ago Microsoft admitted that Office 365 users pay, on average, 80 percent more for use over the life of the product than they would normally for a perpetual license. With 85 million users, Microsoft makes hundreds of millions every month - from Office 365 alone.

What makes it even more difficult for companies is that many IT and finance managers do not have the necessary insight to understand the use and expenditure of Office 365 and to control them accordingly. Without a consolidated view of on-premise, cloud and mobile use of Microsoft Office, the company's budget will be misplaced - in unnecessary subscriptions, unused accounts and duplicate on-premise licenses. This makes it very tedious to make cost-effective decisions, especially when it comes to contract renewals.

Five tips for investing in SaaS applications

To prevent SaaS from becoming a cost driver and leading to unnecessary compliance risks, companies should consider the following five points:

Apply IT governance for SaaS

IT governance ensures effective IT management and provides measurable and comprehensible rules and control mechanisms. When it comes to locally installed applications, most companies are well positioned here. If a new application has to be installed on a server, a special department is usually responsible for it.

SaaS removes these clear responsibilities as it is very easy to start and operate new platforms and services. Individuals and groups now select technologies in self-service and register - mostly without the knowledge of the IT department - for new services and subscriptions. This shadow IT is neither technically nor strategically integrated into the company's IT service management. No Service Level Agreements (SLAs) apply to these applications, and the IT department does not provide any support or data backup because it does not know anything about it.

IT governance does not end with the purchase and provision of software, but affects the entire life cycle up to the disposal or deletion of the application. Since experience has shown that users do not work reliably here, many virtual machines and user accounts remain in the cloud that are no longer needed - but are charged to the company's account on a monthly basis. This can lead to sharply increasing costs.

The answer to these governance challenges is not to return to centralized IT governance. Rather, IT executives must enable specialist departments to buy software efficiently and in a form that ensures transparency. This can be done using automated, workflow-driven processes for access request, provision and deprovisioning.

Create an overview: who uses which software?

Many companies do not know what applications are installed and who is using them. This can also apply to companies that already use software asset management solutions. Here it is possible that the SAM software does not find and inventory SaaS applications. But companies need a single, integrated view of the users, the usage, and the cost of their SaaS applications. Unfortunately, the administration portals of many SaaS providers work incompletely:

  • The portals indicate which subscriptions were purchased, but almost none of them actively provide an overview of whether and how these SaaS applications and subscriptions are being used.

  • If there is no information about usage behavior, it is difficult if not impossible to optimize SaaS spending. Not surprising. Because why should the providers help the companies to reduce the costs of SaaS?

  • For applications such as Office 365, which are available both on-premise and as a cloud version, this overview must include all usage data, not just the information about the SaaS applications.

  • As companies increase the number of SaaS providers, it becomes almost impossible to track usage across all SaaS portals.

Shift focus from compliance to cost optimization

As the cloud reduces compliance concerns, IT can shift its focus from compliance more towards saving costs as cloud usage increases in the enterprise.Related Articles: Software asset managers in particular can concentrate more on optimizing licenses.

It is important to clarify who is responsible for comparing the licenses and calculating the software expenses. In the on-premise world, the software provider was responsible for identifying the customers who violated the license agreement and were not paying legally. In the SaaS world, the IT department is responsible for managing and controlling the licenses. SAM solutions support license and cost management by providing an overview and transparency of users and usage behavior.

Beware of hidden costs

SaaS offers, which appear to be free of charge, but in practice require expensive company subscriptions, are another challenge. One example is Box, a popular cloud-based storage provider. While the offer is free for individual users, between five and 15 US dollars per user are due for use in the company. Box is not the only provider of such a "freemium model", which can mean a cost trap for companies.

Understand compliance in a SaaS world

SaaS applications are typically licensed on a subscription or usage basis. However, just by tracking user logins, companies are far from meeting all compliance requirements. Since there are also clear terms and conditions for SaaS applications, there are further compliance challenges:

  • SaaS solutions with components such as databases enable use without having to pay immediately. However, corresponding license agreements often contain the passage that the SaaS provider can carry out an audit at a later (often unexpected) date and issue the invoice.

  • Authorized violations by users originating from client-side software components such as plug-ins, applets and agents.

  • Unauthorized use beyond license restrictions based on geographic location, shared logins and use of administrator credentials.

It is important that companies get a complete overview of all applications in the company, including SaaS solutions. You can only get your SaaS costs under control if you know what your software inventory looks like and whether it is under- or over-licensed.